We can’t predict the future. We never have been able to, and we never will. But yet, we still try. On the news you hear pundits asking pollsters who they think will win the next election. On ESPN you hear experts asking who’s going to the Super Bowl next year – often, before the preseason! In the financial world you have crazy Jim Cramer yelling at his viewers the XYZ Company and ABC Corporation are going to make big moves next quarter. Oh really? Then why is it that you are on TV and not sitting on some beach lighting cigars with $100 bills? And why didn’t you inform the rest of us about the Great Recession back in 2007 before it happened? Because he is only making silly guesses like the rest of us as to what one possible future might look like for us. If you are like Dr. Sheldon Cooper from the Big Bang Theory, then you know that String Theory postulates that there are an infinite number of universes living alongside us, in another dimension however and in one of those universes crazy Cramer is correct, but he’s never correct consistently, anywhere.
Humans have a unique foible that plagues us all. We believe that we can take experiences and information from our past and predict the future. Sometimes this works in our favor, like when we are cooking and we don’t touch the hot stove because we know from experience that touching red hot things equals pain. But sometimes it doesn’t work in our favor, like when as older adults we try to do the same thing we easily did as young adults or teenagers – staying up late, playing sports like basketball, or skiing. Past experience tells us we can do those things with little discomfort afterward, but future results show that we now have to take a lot longer to recover.
What does all this have to do with financial planning? It’s simple, we all have a vision of what our future lives will look like. Some of us may envision a future that looks like our grandparents’ retirement did. Some may envision a future not dissimilar from the present. Yet others, may picture themselves in situations worse than their current condition. The truth is that all of those are quite possible futures, and just because we dream of a retirement that includes world travel, good health, and a happy family, doesn’t mean that is how it will end up.
But wait, there’s more! Financial planners help individuals to plan for many different outcomes. What if you had visions of this great future for yourself and your family during your retirement, but once you got there reality was completely different and you hadn’t planned for this reality at all? Financial planning is the best way that I know of to increase the probability that you will be able to meet the future with real expectations no matter the outcome. This is because we can plan for eventualities.
The author, Harry Beckwith wrote about planning saying that, “You never know. So don’t assume that you should. Plan for several possible futures.” When you close your eyes and dream of your future, what do you see? Do you know if you will actually make it there? Do you know the probabilities of overshooting you target? What if you undershoot your target? What happens if a loved one doesn’t make it there with you? So many questions, so many possible outcomes. That's why we must plan today, for tomorrow.